Among the many potential growth markets for Australian live cattle exports in Asia, China easily stands as one of the most promising.
But, despite a recent surge in media headlines proclaiming China as Australia's next major market for live cattle, some serious obstacles still stand in the way of the country becoming a realistic alternative for northern cattle exports in particular.
Behind the excitement is a compelling story of rapidly growing Chinese demand for red meat, highlighted by the recent surge in boxed beef imports to the market from 19,000t in 2011-12 to 92,000t in 2012-13.
China’s own cattle herd has come down from an estimated 130 million head in recent years to around 90m today, and with that has come an emerging recognition within the country that it can no longer produce enough local beef to satisfy demand.
Trade reports indicating that Chinese abattoirs are operating at just 30 percent capacity further serve to highlight the extent of China’s beef supply shortfall.
Adding to the optimism for Australia’s live cattle trade is the fact that an established supply chain for live cattle into China already exists, in the form of Australia’s export dairy heifer trade which involves the shipment of around 50,000 cattle from Southern Australia to China for breeding purposes each year.
The sheer size of China, with a population of 1.2 billion people, many with a healthy and growing appetite for beef, has also fuelled speculation that it could one day rival Indonesia as a major destination for Australian beef cattle.
It’s not hard to see why China is creating so much excitement locally, but behind the scenes the opportunity is not quite as straight-forward as stories about incredible Chinese demand alone would suggest.
While the opportunities in China are indeed considerable, so too are the bureaucratic hurdles that must be cleared before Australian beef cattle producers, and more particularly northern producers who are most in need of alternative live cattle markets, gain access to the market.
Barriers to success
Despite the recent media and political interest in China as a potential feeder and slaughter cattle market, efforts to develop the trade are far from new.
Exporters have been working to develop partnerships in China for not only years but for decades, with the support of industry and government organisations such as LiveCorp, Meat & Livestock Australia and Austrade.
While those efforts have intensified in recent times in the wake of the Indonesian market downturn, leading to more Australian trade delegations visiting the market in recent months than perhaps at any time previously, industry sources say there is still much to be done to gain access to the trade.
The main barrier to success surrounds the need to achieve government-to-government-level cooperation on a new health protocol that will allow the import of feeder and slaughter beef cattle into China.
A key task for Australia’s representatives at the negotiating table is to reassure Chinese officials that Australia does not have harmful, pathogenic strains of the livestock virus Bluetongue that cause commercial loss.
Despite that fact, China’s sensitivity to Bluetongue means that any cattle within the Northern Australian “possible transmission” bluetongue zone- which includes the top section of Australia north of a line from Broome to Sydney – are currently prohibited from entering China.
The closest Australia’s live beef cattle export trade has come to achieving a breakthrough in China occurred in 1998 when both countries signed a slaughter and feeder cattle protocol.
However that protocol only allowed the import of beef cattle into China from outside the Bluetongue zone, effectively limiting imports to cattle from southern Australia.
The timing of the protocol agreement in the midst of the Asian economic downturn effectively meant that few, if any, cattle were exported at the time, and the protocol is now obsolete.
The existing protocol for breeder cattle imports, under which Australia exports around 50,000 dairy heifers to China each year, also requires cattle to be sourced from the Bluetongue-free zone.
While Bluetongue remains a key sticking point, it is also only one of numerous issues that must be agreed upon before both countries can finalise a mutually workable health protocol for a feeder and slaughter cattle trade.
Successful trade access will also require the commercial adoption in China of the strict requirements of Australia’s Exporter Supply Chain Assurance System (ESCAS) in Chinese abattoirs, which is designed to protect the welfare of Australian cattle from the point of arrival to point of slaughter.
Demand the key driver
The prevailing view in the trade is that it will take very strong demand from within China to deliver an agreement that allows for northern cattle exports.
“Nothing happens until you get an environment of cooperation,” LiveCorp chief executive Officer, Sam Brown, told Beef Central.
“That means that nothing happens until your trading partners want the cattle as much as you want to send them there.”
Earlier this year LiveCorp commissioned a wide-ranging project designed to develop a uniform strategy for Australia’s live export trade into China, similar to the strategy recently completed for Indonesia.
The project is focused on developing the information base required to underpin a strategy that will help all Australian visitors to the country, including state and territory politicians who have recently taken a strong interest in the market, to work from the same strategy.
“Through the research our objective is to broaden our already strong relationships with China to form deeper partnerships that deliver economic benefit and prosperity for both importers and exporters in Australia and China,” Mr Brown said.
“With more and more delegations going up there and starting to respond to the interest, it is very important we have a common objective.”
Asked if he believed a protocol was closer to being achieved, he said momentum was starting to emerge, but it was impossible to put a time-frame on likely outcomes.
Elders Senior Marketing Manager – International Livestock Exports Tony Gooden, one of a number of exporters who has been working in China, told Beef Central that while potential trade partnerships into China were significant, protocol issues remained the major barrier at this point.
“We are getting unprecedented demand for beef breeding and feeder/slaughter cattle, but the current Chinese protocols prevent a lot of opportunities from being viable,” Mr Gooden said.